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The National Energy Board (Board) has completed its Final Audit Report for its audit of Alliance’s Safety Management Program.

A draft report documenting the Board’s evaluation of Alliance’s Safety Management Program was provided to Alliance on 23 February 2016 for review and comment. On 17 March 2016, Alliance submitted its response.

The Board has considered Alliance’s comments and has made changes to the Final Audit Report and its Appendices as it determined to be appropriate.

The findings of the audit are based upon an assessment of whether Alliance was compliant with the regulatory requirements contained within:

National Energy Board Act;

National Energy Board Onshore Pipeline Regulations; and

Alliance’s policies, programs, practices and procedures.

Alliance was required to demonstrate the adequacy and effectiveness of the methods selected and employed within its Programs to meet the regulatory requirements listed above.

The Board has enclosed the Final Audit Report and associated appendices with this letter. The Board will make the Final Audit Report and Appendices public on the Board’s website.

Alliance is required to file a Corrective Action Plan (CAP), which describes the methods and timing for addressing the Non-Compliant findings identified through this audit, for approval by the Board prior to 2 May 2016.

The Board will make the CAP public and will continue to monitor and assess all of Alliance’s corrective actions with respect to this audit until they are fully implemented. The Board will also continue to monitor the implementation and effectiveness of Alliance’s Safety Management Program and management system through targeted compliance verification activities as a part of its on-going regulatory mandate.

If you require any further information or clarification, please contact Tim Sullivan, Lead Auditor, Operations Business Unit at 403-801-1289 or toll-free at 1-800-899-1265.

Executive Summary

Companies regulated by the National Energy Board (NEB or the Board) must demonstrate a proactive commitment to continual improvement in safety, security and environmental protection. Pipeline companies under the Board’s regulation are required to incorporate adequate, effective and implemented management systems into their day-to-day operations. These systems and associated technical management programs include the tools, technologies and actions needed to ensure NEB regulated pipelines are safe and remain that way over time. In the public interest, the Board holds companies accountable for safety and environmental outcomes.

This report documents the Board’s comprehensive audit of Alliance’s management system and Safety Management program applicable to its facilities that are regulated by the NEB. The audit was conducted using the National Energy Board Onshore Pipeline Regulations (OPR) as amended on 21 April 2013. This amendment clarified the Board’s expectations for establishing and implementing a documented management system and Safety Management program. Before issuing the amendment, the Board consulted and communicated with its regulated companies with respect to the new requirements; therefore, an implementation grace period was not given when the OPR was promulgated. As a result, when evaluating compliance, this audit did not consider any extra time Alliance may have needed to implement changes associated with the formalized management system requirements. As indicated in the amendments, companies must
have an effective and well-documented Safety Management program as a key component of their management system.

The Board conducted the audit following its published audit protocol, which identifies five management system elements. These five elements are broken into 17 sub-elements. Each sub-element reflects several regulatory requirements. Companies must comply with 100 per cent of the regulatory requirements of each sub-element being assessed. If a company’s program is found to be deficient with respect to any regulatory requirement, the entire sub-element will be found Non-Compliant. This report also includes an assessment of Alliance’s management system against the requirements of OPR, section 6.1.

The Board’s audit of Alliance’s regulated facilities found that Alliance is in the process of establishing and implementing an operational management system that will account for all of the technical programs required by the Board.

The Board noted that Alliance’s records indicate that an Operational Excellence Management System (OEMS) was implemented in 2008 for the purpose of creating a structured platform for the ongoing identification and active discussion of operational risks. Since then, quarterly OEMS management review meetings have been held to which discussions on current risks, operational matters and regulatory updates are discussed.

Alliance’s records also indicated that an internal evaluation of OEMS was conducted in 2012, which resulted in a new iteration of Alliance’s management system that is being rebranded as the Operational Risk Management System (ORMS). Alliance indicated that ORMS is “designed to
be an overarching, integrated framework of vision, policies, standards, programs and governance processes to be used by the company in working towards meeting its corporate objectives of “zero safety, pipeline or environmental incidents and compliant, ethical and good neighbor wherever we operate”.

Regardless of when Alliance started its management system development, the Board identified that Alliance’s management system is in a transitory state between the program-based management practices it used in the past and its new management system approach. This has contributed to a Non-Compliant finding related to establishing and implementing a compliant management system. It is important to understand that the Board’s finding regarding Alliance’s management system primarily reflects the company’s stage in developing and applying its management system. It does not necessarily reflect the lack of technical management activities being undertaken to ensure the safety of the pipeline.

The Board’s audit of Alliance’s management system included an assessment of the individual management system processes as described in the OPR and the Board’s audit protocol. As documented in this report, the Board found that Alliance has documented some of the required processes within its Operational Risk Management System. However, the Board found that most of Alliance’s management system processes were not sufficiently systematic, explicit, comprehensive and proactive to meet the OPR requirements.

The Board notes that, regardless of the reasons for non-compliance, companies were required to be compliant with the Board’s management system requirements when the OPR were updated in 2013. Alliance will need to develop and implement corrective actions to ensure establishment and implementation of its management system.

In addition to evaluating Alliance’s management system and associated processes, the Board’s audit also included an evaluation of Alliance’s Safety Management program to determine the applicability and integration of the management system within it and to assess whether Alliance is meeting its requirements to develop, implement and maintain a Safety Management program that anticipates, prevents, manages and mitigates potentially dangerous conditions and exposure to those conditions during all activities relating to construction, operation, maintenance, abandonment and emergency situations. The Board found that, notwithstanding the documentation issues relating to its management system processes, the processes and practices presently used by Alliance identified the majority, and most significant, of its safety management related hazards and that Alliance has developed and implemented operational controls and inspection and monitoring programs to address these hazards. The Board notes that Alliance’s Safety Management program has been in existence for many years, thus its related practices and procedures are well established within the organization. The Board did identify some deficiencies not related to management system process development. All of the Board’s findings are documented in Appendix I of this audit report.

In analyzing the results of its audit as a whole, the Board notes that it has made a significant number of Non-Compliant findings. The majority of these findings fall into three general categories:

Non-compliances relating to management system process development;

Non-compliances relating to Alliance’s interpretation of OPR requirements; and

Non-compliances relating to technical content.

The Board notes that the majority of all of the Non-Compliant findings made by the Board relate to management system process development.

The Board has determined that enforcement actions are not immediately required to address the Non-Compliant findings identified in this audit. Within 30 days of the Final Audit Report being issued, Alliance must develop and submit a Corrective Action Plan for Board approval. The Corrective Action Plan must detail how Alliance intends to resolve the non-compliances identified by this audit. The Board will assess implementation of the corrective actions to confirm they are completed in a timely manner and applied consistently across Alliance’s regulated system. The Board will also continue to monitor the overall implementation and effectiveness of Alliance’s management system and Safety Management program through targeted compliance verification activities as part of its ongoing regulatory mandate.

1.0 Audit Terminology and Definitions

(The Board has applied the following definitions and explanations in measuring the various requirements included in this audit. They follow or incorporate legislated definitions or guidance and practices established by the Board, where available.)

Adequate: The management system, programs or processes complies with the scope, documentation requirements and, where applicable, the stated goals and outcomes of the NEB Act, its associated regulations and referenced standards. Within the Board’s regulatory requirements, this is demonstrated through documentation.

Audit: A systematic, documented verification process of objectively obtaining and evaluating evidence to determine whether specified activities, events, conditions management systems or information about these matters conform to audit criteria and legal requirements and communicating the results of the process to the company.

Compliant: A program element meets legal requirements. The company has demonstrated that it has developed and implemented programs, processes and procedures that meet legal requirements.

Corrective Action Plan: A plan that addresses the non-compliances identified in the audit report and explains the methods and actions that will be used to correct them.

Developed: A process or other requirement has been created in the format required and meets the described regulatory requirements.

Effective: A process or other requirement meets its stated goals, objectives, targets and regulated outcomes. Continual improvement is being demonstrated. Within the Board’s regulatory requirements, this is primarily demonstrated by records of inspection, measurement, monitoring, investigation, quality assurance, audit and management review processes as outlined in the OPR

Established: A process or other requirement has been developed in the format required. It has been approved and endorsed for use by the appropriate management authority and communicated throughout the organization. All staff and persons working on behalf of the company or others that may require knowledge of the requirement are aware of the process requirements and its application. Staff has been trained on how to use the process or other requirement. The company has demonstrated that the process or other requirement has been implemented on a permanent basis. As a measure of “permanent basis”, the Board requires the requirement to be implemented, meeting all of the prescribed requirements, for three months.

Finding: The evaluation or determination of the compliance of programs or elements in meeting the requirements of the National Energy Board Act and its associated regulations.

Implemented: A process or other requirement has been approved and endorsed for use by the appropriate management authority. It has been communicated throughout the organization. All staff and persons working on behalf of the company or others that may require knowledge of the requirement are aware of the process requirements and its application. Staff has been trained on how to use the process or other requirement. Staff and others working on behalf of the company have demonstrated use of the process or other requirement. Records and interviews have provided evidence of full implementation of the requirement, as prescribed (i. e. the process or procedures are not partially utilized).

Inventory: A documented compilation of required items. It must be kept in a manner that allows it to be integrated into the management system and management system processes without
further definition or analysis.

List: A documented compilation of required items. It must be kept in a manner that allows it to be integrated into the management system and management system processes without further definition or analysis.

Maintained: A process or other requirement has been kept current in the format required and continues to meet regulatory requirements. With documents, the company must demonstrate that it meets the document management requirements in OPR, section 6.5 (1)(o). With records, the company must demonstrate that it meets the records management requirements in OPR, section 6.5 (1)(p).

Management System: The system set out in OPR sections 6.1 to 6.6. It is a systematic approach designed to effectively manage and reduce risk, and promote continual improvement. The system includes the organizational structures, resources, accountabilities, policies, processes and procedures required for the organization to meet its obligations related to safety, security and Environmental Protection.

(The Board has applied the following interpretation of the OPR for evaluating compliance of management systems applicable to its regulated facilities.)

As noted above, the NEB management system requirements are set out in OPR sections 6.1 to 6.6. Therefore, in evaluating a company’s management system, the Board considers more than the specific requirements of section 6.1. It considers how well the company has developed, incorporated and implemented the policies and goals on which it must base its management system as described in section 6.3; its organizational structure as described in section 6.4; and considers the establishment, implementation, development and/or maintenance of the processes, inventory and list described in section 6.5(1). As stated in sections 6.1(c) and (d), the company’s management system and processes must apply and be applied to the programs described in section 55.

Non-Compliant: A program element does not meet legal requirements. The company has not demonstrated that it has developed and implemented programs, processes and procedures that meet the legal requirements. A corrective action plan must be developed and implemented.

Practice: A repeated or customary action that is well understood by the persons authorized to carry it out.

Procedure: A documented series of steps followed in a regular and defined order thereby allowing individual activities to be completed in an effective and safe manner. A procedure also outlines the roles, responsibilities and authorities required for completing each step.

Process: A documented series of actions that take place in an established order and are directed toward a specific result. A process also outlines the roles, responsibilities and authorities involved in the actions. A process may contain a set of procedures, if required.

(The Board has applied the following interpretation of the OPR for evaluating compliance of management system processes applicable to its regulated facilities.)

OPR section 6.5(1) describes the Board’s required management system processes. In evaluating a company’s management system processes, the Board considers whether each process or requirement: has been established, implemented, developed or maintained as described within each section; whether the process is documented; and whether the process is designed to address the requirements of the process, for example a process for identifying and analyzing all hazards and potential hazards. Processes must contain explicit required actions including roles, responsibilities and authorities for staff establishing, managing and implementing the processes. The Board considers this to constitute a common 5 w’s and h approach (who, what, where, when, why and how). The Board recognizes that the OPR processes have multiple requirements; companies may therefore establish and implement multiple processes, as long as they are designed to meet the legal requirements and integrate any processes linkages contemplated by the OPR section. Processes must incorporate or contain linkage to procedures, where required to meet the process requirements.

As the processes constitute part of the management system, the required processes must be developed in a manner that allows them to function as part of the system. The required management system is described in OPR section 6.1. The processes must be designed in a
manner that contributes to the company following its policies and goals established and required by section 6.3.

Further, OPR section 6.5(1) indicates that each process must be part of the management system and the programs referred to in OPR section 55. Therefore, to be compliant, the process must also be designed in a manner which considers the specific technical requirements associated with each program and is applied to and meets the process requirements within each program. The Board recognizes that single process may not meet all of the programs; in these cases it is acceptable to establish governance processes as long as they meet the process requirements (as described above) and direct the program processes to be established and implemented in a consistent manner that allows for the management system to function as described in 6.1.

Program: A documented set of processes and procedures designed to regularly accomplish a result. A program outlines how plans, processes and procedures are linked; in other words, how each one contributes to the result. A company regularly plans and evaluates its program to check that the program is achieving the intended results.

(The Board has applied the following interpretation of the OPR for evaluating compliance of programs required by the NEB regulations.)

The program must include details on the activities to be completed including what, by whom, when, and how. The program must also include the resources required to complete the activities.

3.0 Introduction: NEB Purpose and Framework

The NEB’s purpose is to promote safety and security, environmental protection and efficient energy infrastructure and markets in the Canadian public interest within the mandate set by Parliament in the regulation of pipelines, energy development and trade. In order to assure that pipelines are designed, constructed, operated and abandoned in a manner that ensures: the safety and security of the public and the company’s employees; safety of the pipeline and property; and protection of the environment, the Board has developed regulations requiring companies to establish and implement documented management systems applicable to specified technical management and protection programs. These management systems and programs must take into consideration all applicable requirements of the NEB Act and its associated regulations. The Board’s management system requirements are described within OPR, sections 6.1 through 6.6.

To evaluate compliance with its regulations, the Board audits the management system and programs of regulated companies. The Board requires each regulated company to demonstrate that they have established and implemented, adequate and effective methods for proactively identifying and managing hazards and risks.

As part of the audit, the Board reviews the compliance and incident history of the company as recorded in NEB files. This helps the Board determine the appropriate scope for the audit. During the audit, the Board reviews documentation and samples records provided by the company in its demonstration of compliance and interviews corporate and regionally-based staff.

The Board also conducts separate but linked technical inspections of a representative sample of company facilities. This enables the Board to evaluate the adequacy, effectiveness and implementation of the management system and programs. The Board bases the scope and location of the inspections on the needs of the audit. The inspections follow the Board’s standard inspection processes and practices. Although they inform the audit, inspections are considered independent of the audit. If unsafe or non-compliant activities are identified during an inspection, they are actioned as set out by the Board’s standard inspection and enforcement practices.

After completing its field activities, the Board develops and issues a final Audit Report. The final Audit Report outlines the Board’s audit activities, provides evaluations of the company’s management system and programs, identifies deficiencies and communicates compliance findings. The Audit Report follows the format of the Board’s published Audit Protocol. Once the Board issues the final Audit Report, the company must submit and implement a Corrective Action Plan to address all Non-Compliant findings. Final Audit Reports are published on the Board’s website. The audit results are integrated into NEB’s risk-informed lifecycle approach to compliance assurance.

4.0 Background

Alliance operates approximately 1,600 km of pipeline in three Canadian provinces. These pipeline facilities include mainline and lateral compressor stations, mainline block valves and associated operational assets. All of these facilities are within the definition of a “pipeline” as included in the NEB Act. Alliance also has a considerable amount of infrastructure in the United States, which completes its North American system. Alliance’s system allows it to transport rich natural gas from the Western Canadian Sedimentary Basin and the Williston Basin to end-users in the United States Midwest and other downstream markets. In order for Alliance to operate its pipelines effectively, it has developed a management structure that reflects its safety and security management, and environmental obligations, as well as its corporate, national, and regional needs.

For Alliance facility information, refer to Appendix II of this report.

During audit planning, company staff indicated that Alliance operates its pipelines and facilities using a common management system and technical programs. In order to effectively evaluate compliance of such an expansive system within a reasonable timeframe, the Board chose to conduct individual, comprehensive audits of Alliance’s required technical programs and management system. This report documents one of five management system and program audits. The audits are titled:

Alliance Safety Management Program Audit;

Alliance Environmental Protection Program Audit;

Alliance Emergency Management Program Audit;

Alliance Third-Party Crossings Program Audit; and

Alliance Public Awareness Program Audit.

Audit results confirmed that Alliance operates its facilities using a common organizational structure to implement a common governance management system that applies to all of its business and operational activities. Some findings are therefore similar in each audit and the individual audit reports reflect this.

5.0 Audit Objectives and Scope

The objective of the audit was to determine the establishment and implementation of Alliance’s management system and the adequacy and effectiveness of its Safety Management program. Alliance was audited against the requirements contained within the following:

National Energy Board Act;

National Energy Board Onshore Pipeline Regulations; and

Alliance’s policies, programs, practices and procedures.

This audit was conducted using the National Energy Board Onshore Pipeline Regulations (OPR) as amended on 21 April 2013. This amendment clarified the Board’s expectations for establishing and implementing a documented management system and Safety Management program. Before issuing the amendment, the Board consulted and communicated with its regulated companies with respect to the new requirements; therefore, an implementation grace period was not given when the OPR was promulgated. As a result, when evaluating compliance, this audit did not consider any extra time Alliance may have needed to implement changes.

6.0 Audit Process and Methodology

In undertaking this audit, the Board has applied its standard audit practice following its published protocols. The Board’s standard practice and audit activities include:

Formal notification of the Board’s intent to audit by letter;

Interactive planning processes with the company;

Information gathering;

Documentation and record review;

Program presentations by company personnel and interviews with company personnel;

Associated inspections and facility reviews;

Close-out discussions and meetings;

Developing and Issuing Draft Audit Report to Alliance;

Developing, finalizing and issuing the Final Audit Report;

Reviewing and approving any required Corrective Action Plans;

Reviewing implementation of Corrective Action Plans; and

Issuing closure letters.

These audit activities allow the company to demonstrate whether its management system and programs comply. They also allow the Board to evaluate the company with respect to: assuring compliance to regulatory requirements; and assuring appropriate safety, security and environmental outcomes as described in OPR, section 6.

As noted, Alliance uses a common management system and Safety Management program and at the time of the audit divided its Canadian assets into four operational regions: Grande Prairie, Whitecourt/Morinville, Kerrobert, and Regina. The Board therefore developed its audit plan to evaluate Alliance’s management system and Safety Management program and to assure that it was appropriate to manage and applied to all of its regulated facilities regardless of location.

To this end, the Board conducted interviews, inspections and documentation and record reviews in each region as well as the Calgary office. It is the Board’s expectation that any audit Non-Compliant findings made and corrective actions required by the Board must be applied across all of Alliance’s Board regulated systems.

7.0 Audit Activities

The Board informed Alliance of its intent to audit its NEB regulated facilities in a letter dated 24 June 2014. Following the issuance of that letter, Board audit staff met with Alliance staff on a regular basis to arrange and coordinate this audit. The Board also provided Alliance with an information guidance document to help Alliance prepare for the audit as well as to provide access to documentation and records to demonstrate its compliance. Alliance established a digital access portal for Board staff to review documentation and records.

On 27 April 2015, an opening meeting was conducted with representatives from Alliance in Calgary, Alberta to confirm the Board’s audit objectives, scope and process. The opening meeting was followed by Calgary office interviews from 27 April to 1 May 2015, and various field level audit activities as described in the table below.

Throughout the audit, Board audit staff gave Alliance daily summaries with action items, where required.

From 30 July to 6 August 2015, the Board held an audit pre-close-out meeting with Alliance. At this meeting Board staff and Alliance staff discussed potential deficiencies identified during field activities and discussed additional information that could be of value to the Board prior to compiling its draft audit report. An audit close-out meeting was held on 30 September 2015 to provide Alliance with a description of the recommendations that staff would be bringing to the Board for decision.

8.0 Management System Evaluation

A company shall establish, implement and maintain a management system that

(a) is systematic, explicit, comprehensive and proactive;

(b) integrates the company’s operational activities and technical systems with its management of human and financial resources to enable the company to meet its obligations under section 6;

(c) applies to all the company’s activities involving the design, construction, operation or abandonment of a pipeline and to the programs referred to in section 55;

(d) ensures coordination between the programs referred to in section 55; and

(e) corresponds to the size of the company, to the scope, nature and complexity of its activities and to the hazards and risks associated with those activities.

In assessing Alliance’s management system the Board applied the definitions and guidance as described in Section 1.0 Audit Terminology and Definitions of this report. The Board’s audit of Alliance’s regulated facilities found that Alliance has not established, implemented and maintained a management system that meets the requirements of the OPR. Currently, Alliance relies on their protection programs practices and activities to ensure that it meets the Board’s requirements to ensure the safety and security of the people, the pipeline and the protection of the environment. This is evident in Appendix I as the majority of the Non-Compliant findings relate to a lack of a documented management system process. While Alliance has established and implemented certain processes that could be considered part of their management system, it was limited to these processes and does account for all of the requirements set forth in OPR, sections 6.1 and 6.5(1). As a result, the Board has found Alliance Non-Compliant with OPR, section 6.1(a) to (e).

The Board noted that Alliance’s records indicate that an Operational Excellence Management System (OEMS) was implemented in 2008 for the purpose of creating a structured platform for the ongoing identification and active discussion of operational risks. Since then, quarterly OEMS management review meetings have been held to which discussions on current risks, operational matters and regulatory updates are discussed.

Alliance’s records also indicated that an internal evaluation of OEMS was conducted in 2012, which resulted in a new iteration of Alliance’s management system that is being rebranded as the Operational Risk Management System (ORMS). Alliance indicated that ORMS is “designed to be an overarching, integrated framework of vision, policies, standards, programs and governance processes to be used by the company in working towards meeting it’s corporate objectives of “zero safety, pipeline or environmental incidents and compliant, ethical and good neighbor wherever we operate”.

Regardless of when Alliance started its management system development, the Board’s audit identified that Alliance’s management system was in a transitory state between the program-based management practices it used in the past and its new management system approach.

In determining Alliance’s compliance with respect to establishing and implementing a management system, the Board reviewed the audit results of Alliance’s Safety Management program processes along with the audit results of other Board program audits completed concurrently. This aided the Board in evaluating Alliance’s systematic practices and deficiencies.

The Board found that Alliance has not met the requirements for establishing and implementing a management system. For the most part, this reflected the transitory nature of its management system as applied to the Safety Management program. The issues related to designing and establishing processes as described below and in Appendix I also contributed to the Board’s Non-Compliant finding. This is especially true with respect to Alliance’s Quality Assurance
Program and auditing process design.

The Board notes that it is important to understand that the Board’s management system Non-Compliant finding reflects the company’s deficiencies in developing and applying its management system. It does not necessarily reflect the lack of technical management activities being undertaken to ensure the safety of the pipeline.

The Board notes that, regardless of the reasons for non-compliance, companies were required to be compliant with the Board’s management system requirements when the OPR were updated in
2013. Alliance will need to develop and implement corrective actions to ensure establishment and implementation of its management system.

As part of Alliance’s Corrective Action Plan to address its management system Non-Compliant finding, the Board is of the view that, Alliance must develop and implement a compliant document control processes that meet OPR requirements for all new and existing documents in the company’s management system. This will serve to assure that the management system processes are designed appropriately and that existing or referenced documents fully meet the OPR requirements.

Based on the Board’s evaluation of Alliance’s management system against the OPR requirements, the Board has determined that Alliance is Non-Compliant with section 6.1. Alliance will have to develop a Corrective Action Plan to address the described deficiencies.

9.0 Program Summary

NEB-regulated companies must demonstrate a proactive commitment to continual improvement in safety, security, and environmental protection. Pipeline companies under the Board’s regulation are required to incorporate Safety Management programs into their day-to-day operations. These programs must include the tools, technologies and actions needed to ensure that workers are safe.

During the audit Alliance indicated that the Board’s required Safety Management program requirements correspond to the company’s Health & Safety Management System. The Board has identified that primary responsibility for Alliance’s Safety Management program resides within its Health and Safety department. This department is comprised of subject matter experts who are responsible for providing health and safety leadership, promotion and direction in organizational activities through management system development and maintenance, stewardship, technical knowledge and support for Alliance employees and contractors.

The Board identified that responsibility for implementation of the Safety Management program resides with a number Alliance’s functional departments. The Board therefore considered the sum of the Health and Safety department and all other departments’ safety management related responsibilities as comprising the Safety Management program for the purposes of this audit.

The Board found that the practices presently used by Alliance identified the majority, and most significant, of its hazards and that Alliance has developed and implemented the operational controls and inspection and monitoring programs to address these hazards. The Board also found that Alliance’s Safety Management program has been in existence for many years, thus the
health and safety related practices and procedures are well established within the organization. Notwithstanding these practices and procedures, the audit identified several non-compliant findings. The majority of the findings fall into three general categories:

Non-compliances relating to management system process development;

Non-compliances relating to Alliance’s interpretation of OPR requirements; and

Non-compliances relating to technical content.

The Board has determined that no enforcement actions are immediately required to address the Non-Compliant findings identified in this audit. Within 30 days of the Final Audit Report being issued, Alliance must develop and submit a Corrective Action Plan for Board approval detailing how it intends to resolve Non-Compliances identified by this audit. The Board will assess the implementation of the corrective actions to confirm that they are completed in an expedient manner, and on a system-wide basis. The Board will also continue to monitor the overall implementation and effectiveness of Alliance’s management system and Safety Management program through targeted compliance verification activities as a part of its on-going regulatory mandate.

10.0 Summary of Audit Findings

The Board conducted the audit following its published Audit Protocol, which identifies five Management System elements. These five elements are broken into 17 sub-elements. Each sub-element reflects several regulatory requirements. Companies must comply with 100 per cent of the regulatory requirements of each sub-element being assessed. If a company’s program is deficient in any regulatory requirement, the entire sub-element will be found non-compliant.

The company will have to develop a corrective action plan to demonstrate to the Board that appropriate actions will be taken to achieve full compliance.

The following summary is a high-level overview of the Board’s audit findings for Alliance’s Safety Management program based on information provided by Alliance during the audit.

Details of how each of the audited elements impacts the Safety Management program and a full description of the Board’s assessment for each of its Management System sub-elements can be found in Appendix I of this report.

Element 1.0 – Policy and Commitment

Sub-element 1.1 – Leadership and Accountability

This sub-element of the audit requirements states that the company must appoint an Accountable Officer and notify the Board of the appointment.

Alliance had submitted a written notice to the NEB indicating that it had appointed an Accountable Officer. In its submission, Alliance confirmed that its Accountable Officer had authority over the human and financial resources required to meet the Board’s substantive expectations.

Based on the information provided by Alliance, the Board has not identified any non-compliance issues. The Board has therefore assessed this sub-element as Compliant.

Sub-element 1.2 – Policy and Commitment Statements

This sub-element of the audit requirements states that the company must have documented policies and goals to ensure the safety and security of the public, workers, and the pipeline and ensure protection of property and the environment. Further, as these policies and goals are to be used to establish and implement the management and programs, the Board requires that the policies and goals be explicit from the perspective of design, content and communication.

The Board found that Alliance had corporate and program level policies and goals that related to the Safety Management program.

Notwithstanding the many policies, programs and initiatives that Alliance had developed to direct and support its Safety Management program, the Board identified non-compliance in the Policy and Commitment Statements sub-element.

Alliance did not demonstrate that it had a policy that was fully explicit on the internal reporting of hazards, potential hazards, incidents and near misses (in that there was no pointed reference to “potential hazards”). Furthermore, Alliance’s policy statement did not fully describe the conditions under which a person making a report will be granted immunity from disciplinary action (in that there was no explanation as to what constituted good-faith reporting).

Based on the Board’s evaluation of Alliance’s management system and the Safety Management program against the requirements, the Board has determined that Alliance is Non-Compliant with this sub-element. Alliance will have to develop corrective actions to address the described deficiencies.

Element 2.0 – Planning

Sub-element 2.1 – Hazard Identification, Risk Assessment and Control

This sub-element of the audit requirements states that the company must have an established, implemented and effective process for identifying and analyzing all hazards and potential hazards, assessing the degree of risk associated with the hazards, and implementing control measures to minimize or eliminate risk.

The Board found that Alliance had not developed a management system process for identifying and analyzing its hazards and potential hazards to meet the OPR requirements.

The Board found that, at the program level, Alliance’s hazard identification practices were limited to front line or field level practices. While front line and field level practices are a necessary component of a hazard and risk program, they do not facilitate a decision making process at the management level to initiate the hierarchy of controls as required by the Canada Labour Code.

The Board found that Alliance had not established and maintained an inventory of hazards and potential hazards at the management system level.

The Board found that, at a program level, Alliance had established various hazard inventories. However, these inventories were limited to its aboveground facilities and do not include all of the occupational health and safety hazards.

The Board found that Alliance has not established and implemented a management system process for the evaluation and managing of the risks associated with the identified hazards. However, risks were being evaluated and managed through established program level practices.

The Board found that Alliance’s Safety Management program practices do not meet the OPR
requirements with respect to process design and implementation.

Based on the Board’s evaluation of Alliance’s management system and Safety Management program against the requirements, the Board has determined that Alliance is Non-Compliant with this sub-element. Alliance will have to develop corrective actions to address the described deficiencies.

Sub-element 2.2 – Legal Requirements

This sub-element of the audit requirements states that the company must have an established, implemented and effective process for identifying and monitoring compliance with all legal requirements applicable to the company. The company must also maintain a list of the legal requirements that apply to it.

The Board found that Alliance has not established and implemented a documented management system process for identifying and monitoring compliance with applicable legal requirements.

The Board also found that Alliance has established and maintained a legal list that includes its federal and provincial requirements. However, this legal list does not include referenced standards.

The Board found that Alliance’s Safety Management program practices does include the identification and monitoring compliance with applicable health and safety legal requirements.

The Board also found that Alliance’s Safety Management program practices do not meet the OPR requirements with respect to process design and implementation.

Based on the Board’s evaluation of Alliance’s management system and Safety Management program against the requirements, the Board has determined that Alliance is Non-Compliant with this sub-element. Alliance will have to develop corrective actions to address the described deficiencies.

Sub-element 2.3 – Goals, Objectives and Targets

This sub-element of the audit requirements states that the company must have an established, implemented and effective process for developing and setting goals, objectives and specific targets for the risks and hazards associated with the company’s facilities and activities.

The Board found that Alliance has not established and implemented a management system and Safety Management program process for setting objectives and specific targets as required by the OPR. However, by practice, Alliance has developed management system and Safety Management program goals, objectives, and targets.

The Board found that Alliance has developed goals for the prevention of ruptures, fatalities and injuries but has not developed goals for the response to incidents and emergency situations. The Board also found that Alliance goals for the prevention of liquid and gas releases is limited to its pipeline right-of-way and does not include its aboveground facilities.

The Board also found that Alliance has based its management system and Safety Management program on these goals.

The Board found that Alliance has established performance measures to assess the company’s success in achieving its goals, objectives and targets.

Based on the Board’s evaluation of Alliance’s management system and Safety Management program against the requirements, the Board has determined that Alliance is Non-Compliant with this sub-element. Alliance will have to develop corrective actions to address the described deficiencies.

This sub-element of the audit requirements states that the company must have a documented organizational structure that enables it to meet the requirements of its management system. The company must also complete an annual documented evaluation to demonstrate that there is adequate human resourcing to meet these obligations.

The Board found that Alliance has a documented organizational structure and communicates the roles, responsibilities and authorities of the officers and employees at all levels of the company.

The Board also found that Alliance did not demonstrate that the human resources allocated to establishing, implementing and maintaining its management system are sufficient to meet the requirements of the management system and to meet the company’s obligations under OPR, section 6.

Based on the Board’s evaluation of Alliance’s management system and Safety Management program against the requirements, the Board has determined that Alliance is Non-Compliant with this sub-element. Alliance will have to develop corrective actions to address the described deficiencies.

Element 3.0 – Implementation

Sub-element 3.1 – Operational Control-Normal Operations

This sub-element of the audit requirements states that the company must have an established, implemented and effective process for developing and implementing corrective, mitigative, preventive and protective controls for the hazards and risks identified in Elements 2.0 and 3.0.

The Board found that, at the Safety Management program level, Alliance has developed and implemented controls for the identified hazard and risks and have communicated those controls to anyone who is exposed to the risks.

The Board also found that Alliance has not established and implemented a documented management system process for developing and implementing controls.

The Board found that Alliance has not established and maintained a documented management system process for coordinating and controlling the operational activities of employees or other people working with or on behalf of the company.

The Board also found that Alliance’s Safety Management program practices do not meet the OPR requirements with respect to process design and implementation.

Based on the Board’s evaluation of Alliance’s management system and Safety Management program against the requirements, the Board has determined that Alliance is Non-Compliant with this sub-element. Alliance will have to develop corrective actions to address the described deficiencies.

This sub-element of the audit requirements states that the company must establish and maintain plans to identify the potential for upset or abnormal operating conditions, accidental releases, incidents and emergency situations. This sub-element also included requirements for companies to establish and implement a process for developing contingency plans for abnormal events that may occur during construction, operation, maintenance, abandonment or emergency situations.

The Board found that, subject to its non-compliant finding relating to its management system process with respect to developing controls (Sub-element 3.1 Operational Control – Normal Operations above), Alliance has developed controls that address its identified health and safety hazards and risks relating to upset and abnormal operating conditions.

The Board found that Alliance has developed and documented many contingency plans.

The Board also found that Alliance had not established a management system or program level process for developing contingency plans that meets the Board’s requirements.

Based on the Board’s evaluation of Alliance’s management system and the Safety Management program against the requirements, the Board has determined that Alliance is Non-Compliant with this sub-element. Alliance will have to develop corrective actions to address the described deficiencies.

Sub-element 3.3 – Management of Change

This sub-element of the audit requirements states that the company must have an established, implemented and effective process for identifying and managing any change that could affect safety, security or protection of the environment.

The Board found that Alliance demonstrated that it had established and implemented a number of management of change processes, procedures and practices to document and manage change. However, these processes, practices and procedures function independently of one another and thus are not systematic.

The Board also found that Alliance’s current management of changes activities do not account for changes to the company’s organizational structure as required by the OPR.

The Board found that Alliance has established a management of change process at the Safety Management program level but it does not account for all the changes that are to be managed as required by the OPR.

The Board also found that Alliance’s Safety Management program practices do not meet the OPR requirements with respect to process design and implementation.

Based on the Board’s evaluation of Alliance’s management system and Safety Management program against the requirements, the Board has determined that Alliance is Non-Compliant with this sub-element. Alliance will have to develop corrective actions to address the described deficiencies.

Sub-element 3.4 – Training, Competence and Evaluation

This sub-element of the audit requirements states that the company must have an established, implemented and effective process for developing competency requirements and training programs for its employees and contractors. These competency requirements and training programs must enable employees and contractors to perform their duties in a manner that is safe, ensures the security of the pipeline, and protects the environment.

The Board has found that Alliance has not established and implemented a documented management system and Safety Management program process for developing competencies and training programs.

The Board also found that Alliance has developed and implemented training programs for all employees and has developed competencies for its field maintenance technicians. However, these competencies are limited to matters of safety and do not included environmental protection and emergency management considerations.

The Board has found that Alliance has established and implemented a documented management system and Safety Management program process for verifying the competency and training of certain employees within its organization. However, this process does not include all employees or other persons working with or on behalf of the company as required in the OPR.

The Board has also found that Alliance has not established and implemented a documented management system and Safety Management program process to make employees and other persons working with or on behalf of the company aware of their responsibilities.

Based on the Board’s evaluation of Alliance’s management system and Safety Management program against the requirements, the Board has determined that Alliance is Non-Compliant with this sub-element. Alliance will have to develop corrective actions to address the described deficiencies.

Sub-element 3.5 – Communication

This sub-element of the audit requirements states that the company must have an established, implemented and effective process for internally and externally communicating safety, security and environmental protection information.

The Board found that Alliance communicates throughout its organization and externally as a matter of organized practice.

The Board also found that Alliance has not established and implemented an internal and external communication process that meets the OPR requirements.

Based on the Board’s evaluation of Alliance’s management system and Safety Management program against the requirements, the Board has determined that Alliance is Non-Compliant with this sub-element. Alliance will have to develop corrective actions to address the described deficiencies.

Sub-element 3.6 – Documentation and Document Control

This sub-element of the audit requirements states that the company must have an established, implemented and effective process for identifying and managing the documents required to meet the company’s obligations for conducting activities in a manner that ensures the safety and security of the public, company employees and the pipeline, and that protects property and the environment.

The Board found that Alliance had established and implemented a documented management system and Safety Management process for preparing, reviewing, revising and controlling its documents. However, this process does not include defined revision schedules for its documents.

The Board also found that Alliance had not established and implemented a documented management system and Safety Management program process for identifying the documents required for the company to meet its obligations under OPR section 6.

The Board found that Alliance has developed documents that would be typically expected for a company of its size and to the scope, nature and complexity of its activities.

Based on the Board’s evaluation of Alliance’s management system and Safety Management program against the requirements, the Board has determined that Alliance is Non-Compliant with this sub-element. Alliance will have to develop corrective actions to address the described deficiencies.

Element 4.0 – Checking and Corrective Action

Sub-element 4.1 – Inspection, Measurement and Monitoring

This sub-element of the audit requirements states that the company must establish and implement an effective process for inspecting and monitoring its activities and facilities. This is so that the company can evaluate the adequacy and effectiveness of the protection programs and take corrective and preventive actions if deficiencies are identified.

The Board found that Alliance has not established and implemented a documented management system process for inspecting and monitoring the company’s activities and facilities to evaluate the adequacy and effectiveness of the Safety Management program as required by the OPR.

The Board also found that Alliance did not demonstrate that it was inspecting to its legal requirements as required by the OPR.

The Board found that Alliance was taking corrective and preventive actions for the deficiencies identified through its Safety Management program inspections.

The Board also found that Alliance’s Safety Management program practices do not meet the
OPR requirements with respect to process design and implementation.

Based on the Board’s evaluation of Alliance’s management system and Safety Management program against the requirements, the Board has determined that Alliance is Non-Compliant with this sub-element. Alliance will have to develop corrective actions to address the described deficiencies.

This sub-element of the audit requirements states that the company must establish and implement an effective process for reporting hazards, potential hazards, incidents and near-misses, and for taking corrective and preventive actions to address them. This includes investigating if the hazards, potential hazards, incidents and near-misses have or could have resulted in the safety and security of the public, employees and the pipeline, and protection of property and the environment. This sub-element also requires a company to have an established, maintained and effective data management system for monitoring and analyzing the trends in hazards, incidents and near-misses.

The Board found that Alliance had established and was maintaining a data management system for monitoring and analyzing the trends in its hazards, incidents, and near-misses.

The Board also found that Alliance has not established and implemented a management system process for the internal reporting of hazards, potential hazards, incidents and near-misses and for taking corrective and preventive actions, including the steps to manage imminent hazards.

Based on the Board’s evaluation of Alliance’s management system and Safety Management program against the requirements, the Board has determined that Alliance is Non-Compliant with this sub-element. Alliance will have to develop corrective actions to address the described deficiencies.

Sub-element 4.3 – Internal Audit

This sub-element of the audit requirements states that a company must establish and implement an effective quality assurance program for its management system and for each protection program, including a process for conducting regular inspections and audits and for taking corrective and preventive actions if deficiencies are identified.

The Board found that Alliance was undertaking many of the activities that are normally associated with a quality assurance program. The Board found, however, that Alliance had not organized them within a program as required by the OPR.

The Board also found that Alliance has not established and implemented a documented management system and Safety Management program process for conducting audits in accordance with section 53 of the OPR.

The Board found that Alliance was not able to demonstrate that it has undertaken audits consistent with OPR sections 53 and 55 requirements.

Based on the Board’s evaluation of Alliance’s management system and Safety Management program against the requirements, the Board has determined that Alliance is Non-Compliant with this sub-element. Alliance will have to develop corrective actions to address the described deficiencies.

Sub-element 4.4 – Records Management

This sub-element states that a company must establish and implement an effective process for generating, retaining, and maintaining records that document the implementation of the management system and its protection programs.

The Board found that Alliance had implemented consistent records management practices to document the implementation of its management system and Safety Management program.

The Board also found that Alliance has not established and implemented a management system and Safety Management program process that meets the OPR requirements.

Based on the Board’s evaluation of Alliance’s Management System and Safety Management program against the requirements, the Board has determined that Alliance is Non-Compliant with this sub-element. Alliance will have to develop corrective actions to address the described deficiencies.

Element 5.0 – Management Review

Sub-element 5.1 – Management Review

This sub-element states that a company must establish and implement an effective process for conducting an annual management review of the management system and each protection program and for ensuring continual improvement in meeting the company’s obligations. This sub-element also requires a company to complete an annual report for the previous calendar year, signed by the accountable officer, describing the performance of the company’s management system in meeting its obligations.

The Board found that Alliance had developed processes for and undertaken activities relating to its Management Review responsibilities.

The Board also found that Alliance’s processes did not meet all of the requirements outlined in the OPR.

The Board also found that some of the Non-Compliant findings in this audit are related to sub-elements where Alliance’s Senior Management has responsibilities to ensure that management direction, oversight and formal monitoring are occurring.

Based on the Board’s evaluation of Alliance’s management system and Safety Management program against the requirements, the Board has determined that Alliance is Non-Compliant with this sub-element. Alliance will have to develop corrective actions to address the described deficiencies.

11.0 Conclusions

Companies regulated by the NEB must demonstrate a proactive commitment to continual improvement in safety, security and environmental protection. Pipeline companies under the Board’s regulation must establish and implement effective management systems and Safety Management programs in their day-to-day operations. This includes the tools, technologies and actions needed to ensure workers are safe.

During this audit Alliance was required to demonstrate the adequacy and effectiveness of its management system and Safety Management program to the Board. The Board reviewed documentation and records provided by Alliance, conducted inspections and interviewed Alliance staff.

Based on its review, the Board found that Alliance was in a transitory period in terms of establishing and implementing its management system. Additionally, the Board’s audit found that some of Alliance’s management system processes were not designed in a manner that allowed its management system to meet the requirements of OPR section 6.1. Consequently, the Board has found that Alliance’s management system is Non-Compliant.

The Board has found that Alliance’s Safety Management program reflected the transitory nature of Alliance’s management system and process issues as noted. The Board’s audit found, however, and most importantly, that, regardless of the design and implementation status of its management system, Alliance’s Safety Management program and the processes and practices being used, identified and controlled the majority and most significant of the company’s emergency management related hazards and risks.

In analyzing Alliance’s Non-Compliant findings the Board has found that most of them fall into three general categories:

Non-compliances relating to management system process development;

Non-compliances relating to Alliance’s interpretation of OPR requirements; and

Non-compliances relating to technical content

The Board notes that the majority of all of the Non-Compliant findings made by the Board relate to management system process development.

The Board has determined that while no enforcement actions are immediately required to address these non-compliant findings, as per the Board’s standard audit practice, Alliance must develop and submit a corrective action plan describing its proposed methods to resolve the non-compliances identified and the timeline in which corrective actions will be completed. Alliance will be required to submit its corrective action plan for approval within 30 days of the Final Audit Report being issued by the Board.

The Board will assess the implementation of all of Alliance’s corrective actions to confirm they are completed in a timely manner and on a system wide basis until they are fully implemented. The Board will also continue to monitor the overall implementation and effectiveness of Alliance’s Safety Management program and management system as a whole through targeted compliance verification activities as a part of its ongoing regulatory mandate.

The Board will make its Final Audit Report and Alliance’s approved corrective action plan public on the Board’s website.